In an ever-evolving financial landscape, people using decentralized freelance marketplaces are playing a groundbreaking role in shaping the future of on-chain credit. Thanks to the transparent and accessible nature of blockchain technology, freelancers could be among the first individuals to borrow money on-chain without collateral. Here's why this group of people will pave way for on-chain borrowing gaining traction.
Why Employment History is King
When it comes to borrowing money, your employment info is your secret weapon. It's the main thing lenders check to see if you're good for the money. For freelancers using decentralized platforms, their work history – every gig, every payment, every review – is up there on the blockchain for all to see. It's an open book of proof that they are able to pay back.
Now think about the old-school way of checking employment history. It's an inefficient process involving contacting bosses, cross-checking pay slips all just to verify that you have a real job. With the blockchain, lenders can skip those steps and get straight to the point. They can directly check a freelancer's work history on the blockchain, making things quicker and easier for everyone involved.
To take things one step further, freelance platforms could even tokenize future earnings for established accounts. A reputable freelancer could use this to access an uncollateralized loan and it’d be in their interest to pay it back considering they’d be tarnishing their hard earned credibility if they fail to repay.
Shaking Up the Credit Scene
Traditional credit systems suck. They’re controlled by a handful of major institutions. Their systems are slow. They’re notoriously bad at keeping your data safe and it only takes a few personal details for someone to impersonate you. In the end, you even need pay money just to see your own credit score.
On-chain credit brings about a paradigm shift. In a decentralized, blockchain-based system, every action can contribute to your creditworthiness. This includes not just traditional factors like loan repayment history. Active freelance work builds strong signals for credit, but also participation in Decentralized Autonomous Organizations (DAOs) and even engagement in blockchain-based games can all count.
Each of these actions, tied to your blockchain identity, contributes to building your credit. It's a way of actively accumulating creditworthiness without needing anyone's permission or relying on a centralized authority.
Why You Should Care
For many people around the world, this can open up access to fair interest rates. In Brazil, mortgage rates are over 10%. Credit cards can legally charge 600% APY when you’re late on credit card payments. Having access to global interest rates can solve so many problems for so many people.
Even in the developed world, on-chain credit could make borrowing money more transparent and fair, reducing the chances of sketchy practices and helping more people get in on the financial action. Plus, it could make the process of checking out someone's credit history quicker and cheaper.
It also puts you in the driver's seat, giving you the power to build and keep an eye on your own credit. You won't have to pay to access your own credit score.
Looking Ahead
When freelance marketplaces gain traction, we might see the whole Decentralized Finance (DeFi) ecosystem pick up huge momentum. When freelancers start gaining access to uncollateralized on-chain credit, it'll quickly open doors for others too.
But like any groundbreaking technology, this shift will come with its own challenges, such as ensuring privacy, combating fraud, and maintaining regulatory compliance. However, there are plenty of great solutions out there already. For example. ZK proofs can verify specific claims about identity or work experience without revealing identity. It’s just a matter of building the infrastructure to create an environment where people want to work in a decentralized marketplace.
V-Lance: ETH Global Waterloo 2023 Hackathon project
My team at ETH Global Waterloo built a proof of concept on-chain professional passport. A problem with freelance platforms is that it's hard to verify anything people say. So our solution provided on-chain proof to backup claims about project & work experience.
https://ethglobal.com/showcase/v-lance-3j8qe
We built on top of TalentLayer, which is a freelance marketplace builder. We used Sismo’s zkproofs to truly verify whether someone has contributed to some pre-defined list of repositories. This allows a person to prove that they contributed without revealing their identity. This would be practical for people working with a pseudonymous identity.
We stored the result of the proofs on our own smart contract and used The Graph to query the data from our front-end.
Most people publicize their identities. For them we planned to use Ethereum Attestation Service as a means to let people have their friends and colleagues endorse them on claims about where they worked and what projects they worked on. Being a 36-hour hackathon, we ran out of time before we implemented a front-end for making attestations. But this is something we may add as we continue this project.
And we used NounsDAO’s artwork to add some style on top of TalentLayer’s default UI.
A web3 powered freelance marketplace could potentially bring better talent & client verifications than what’s seen in web2. It also enables cross-platform interoperability: Access jobs/clients on other freelance platforms. There’s no doubt about whether web3 tech can create a better product.
I feel the main challenge is in winning over traffic. Web3 freelance needs to be able to compete with Web2.
With many advancements in usability like account abstraction, there will be little friction for people to start pouring into web3 platforms.
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